Nonjibhai Vs. Ramkishan and ors. - Court Judgment

S.M.N. Raina, J.

1. This is an appeal arising out of an execution case.

2. The respondents had filed a suit against the appellant for ejectment and arrears of rent. In the said suit a com-promise decree was passed on 1-9-1971-Under the said decree, the appellant was to pay Rs. 10,596/- to the respondents in instalments as under:

Amount.

Dateof Payment.

1.

Rs.3,000/-

30-1-1972

2.

Rs.1,667/-

30-4-1972

3.

Rs.1,977/-

30-1-1973

4.

Rs.1,976/-

30-1-1974

Total-

-Rs.10,596/-(sic)

It was further agreed that from 1-5-1972 the appellant shall pay a sum of Rupees 127/- per month to the respondents on account of damages for use and occupation of the accommodation in his occupation and in case he paid the instalments and monthly amount of damages as specified in the decree, he shall be entitled to continue as tenant of the accommodation on the old rate of rent; but if he committed any default in the payment of any of the instalment or the monthly amount of damages, he shall deliver possession of the accommodation to the respondents who shall also be entitled to obtain possession thereof and to recover the balance of the amount due by executing the decree.

3. It was not disputed before me that there was no default in the payment of the first three instalments. In respect of the last instalment payable on 30-1-1974, the appellant deposited in Court a cheque for a sum of Rs. 2,110/- inclusive of damages. The cheque was, however, dishonoured by the Bank as there was some alteration which had not been initialled. The appellant filed an application under Section 148 of the Code of Civil Procedure for extension of time for depositing the amount of the fourth instalment; but it was rejected. Thereafter, the decree-holders (respondents) applied for execution of the decree for possession. It was opposed by the appellant mainlyon the ground that the clause relating to possession in the compromise decree was in the nature of a penal clause which could not be enforced and it was open to the executing Court to award some compensation to the decree-holders on account of the default in payment of the last instalment. The contention of the appellant was rejected by the executing Court which proceeded to execute the decree. Being aggrieved thereby, the appellant preferred an appeal which was dismissed by the District Judge, Khand-wa. He has, therefore, preferred this second appeal.

4. Shri P. C. Naik, learned counsel for the appellant, mainly urged two points before me. His first contention was that the consent decree relating to ejectment may be treated as a nullity because it was made without reference to any of the grounds specified in Section 12 of the M. P. Accommodation Control Act, 1961 (hereinafter referred to as 'the Act'). The second contention was that the stipulation in the decree regarding delivery of possession was in the nature of a penal clause which could not be enforced by the executing Court and decree-holders were merely entitled to some compensation for non-payment of the fourth instalment in time.

5. So far as the first contention is concerned, it cannot succeed for the following reasons:

While dealing with a consent decree in a suit for ejectment their Lordships of the Supreme Court made the following observations in Nagindas v. Dalpatram. AIR 1974 SC 471 in para. 29 which are pertinent: 'If on the face of it, the decree does not show the existence of such material or jurisdictional fact, the executing Court may look to the original record of the trial Court to ascertain whether there was any material furnishing a foundation for the trial Court's jurisdiction to pass the decree it did. The moment it finds that prima facie such material existed, its task is complete. It is not necessary for it to go further and question the presumed or expressed finding of the trial Court on the basis of that material. All that it has to see is whether there was some material on the basis of which the rent Court could have --as distinguished from must have--been satisfied as to the statutory ground for eviction.'

6. In the instant case it would appear that in para. 7 of the plaint the plaintiff had averred that a sum of Rs. 6,917/-was due from the defendant-appellant till 31-7-1970 on account of arrears of rent and the said amount had not been paid within two months of a notice of demand served on him on 6-7-1970. It would appear from para. 7 of the written statement that the aforesaid facts were not disputed by the defendant and thus the plaintiffs were entitled to evict him from the accommodation in suit on the ground specified in Clause (a) of Sub-section (1) of Section 12 of the Act. It is not the case of the appellant that he had fulfilled the conditions laid down in Sub-section (1) of Section 13 of the Act and, therefore, he was not liable to be evicted on the aforesaid ground. As there was sufficient material on record to establish one of the statutory grounds for eviction, the decree cannot be held to be a nullity on the principle laid down by their Lordships in Nagindas v. Dalpatram, AIR 1974 SC 471 (supra).

7. The next point for consideration is whether the clause relating to possession in the decree is in the nature of a penal clause and as such the executing Court is competent to grant relief to the appellant in respect thereof. In this connection Shri N. S. Kale, learned counsel for the respondents, submitted that it is not open to the executing Court to go behind the decree and it must execute the decree as it stands. He relied on the following decisions in support of his contention:

C H. Kinch v. E. K. Walcott, AIR 1929 PC 289.

Govind v. Murlidhar, AIR 1953 Bom 412.

C. F. Angadi v. Y. S. Hirannayya, AIR 1972 SC 239.

In none of the aforesaid cases the question whether the principles underlying Section 74 of the Contract Act are applicable to a consent decree was either examined or decided. All that was emphasised in the Privy Council case was that a consent order is not a nullity. It is at the most voidable and stands until it has been effectively set aside. In the Bombay case it was held that a consent decree, which is contrary to law. binds the parties thereto, unless it is set aside by taking proper proceedings. In C. F. Angadi v. Y. S. Hirannayya (supra) their Lordships made the following observations in para. 12, which are pertinent:

'Although a contract is not the less a contract because it is embodied in aJudge's order, or, as saicf by Parke, J. inWentworth v. Bullen, (1829) 9 B & C 840 at p. 85C = 109 ER 313, the contract of the parties is not the less a contract, and subject to the incidents of a contract, because there is super-added the command of a judge', still we think it is something more than a contract.'

From the aforesaid observations it is clear that a consent decree retains its character as a contract because it is founded on an agreement between the parties and is, therefore, subject to the incidents of a contract. A contract being not valid and unenforceable on account of some illegality, stands on a different footing from a contract containing merely a penal clause. A contract containing a penal clause is perfectly lawful; but Section 74 of the Contract Act provides that while enforcing such a contract, the penal clause need not be enforced. The said section embodies a very important principle of equity pertaining to enforcement of contracts which are otherwise lawful.

8. In Attarbai v. Mishrilalsa, 1966 Jab LJ 1133 = (AIR 1966 Madh Pra 318) it was held that a compromise decree has all the elements of a contract, being based on a contract. In Bahadur Singh v. Gulab Devi, 1975 Jab LJ 649 it was held that Section 74 of the Contract Act applies to a compromise decree as well and if a stipulation is found to be a penal clause, the Court can relieve a party against forfeiture. I entirely agree with this view.

9. The question, however, is whether the clause relating to eviction of the appellant can be construed as a penal clause. If the suit, in which the compromise decree has been passed, had been purely a money suit or a suit only for arrears of rent in which a decree for eviction could not be passed, the clause relating to eviction of the appellant on his failure to pay the amount within the stipulated time could be construed as a penal clause; but we have to bear in mind that the suit was for arrears of rent and ejectment in which a decree for ejectment could be passed if the claim of the plaintiffs was duly established. It has already been indicated above that from the pleadings it is clear that the plaintiffs wanted to seek eviction of the appellant on the ground specified in Clause (a) of Sub-section (1) of Section 12 of the Act and this ground was established by certain admissions made by the appellant in para. 7 of the written statement.

10. The question whether a particular clause in a contract is a penal clause is a question of construction to be decided upon the terms and inherent circum-stances of each particular contract, judged as at the time of the making of the contract, not as at the time of the breach: Chitty on Contracts, Twenty-third Edition, Vol. I, para. 1492 and Public Works Commissioner v. Hills, 1906 AC 368 at p. 376 and Webster v. Bosanquet, 1912 AC 394. The law is settled that the question has to be decided on the basis of the circumstances obtaining at the time the contract was made. In fact, this position was not disputed by the learned counsel for both the sides. It is no doubt true that the claim for eviction was resisted on the ground of invalidity of the notice as well but it appears that the appellant had an apprehension that an eviction decree may eventually be passed against him and, therefore, he must have welcomed a compromise under which he could avoid eviction on certain terms.

11. Shri Naik, learned counsel for the appellant, however, urged that by the compromise the appellant merely wanted to admit the claim for arrears of rent and not the claim for ejectment and, therefore, the clause relating to eviction should be construed as a penalty clause. In this connection he laid stress on the opening paragraph of the compromise decree; but for a proper construction of the terms of the contract it is necessary to take into consideration the compromise decree as a whole. It is significant that in Clause (c) it is specifically mentioned that the defendant would continue to pay Rs. 127/- per month as damages for use and occupation. The expression 'damages for use and occupation' is significant. It clearly indicates that until the entire amount of arrears of rent was cleared off by payment of the instalments on the dates specified therein, the appellant was not to be treated as a tenant but merely as a tenant on sufferance after the termination of his tenancy. If we read Clause (c) along with Clause (d) of the compromise it would be clear that eviction of the appellant was in contemplation of the parties as a substantive relief in the decree with a concession in favour of the appellant that if he cleared off the arrears by making payments on the due dates, he would be entitled to continue in possession of the accommodation as a tenant but not otherwise.

12. There is a clear distinction between a provision in the nature of a concession and one by way of penalty. The distinction between a concession and a penal clause was pointed out by a Full Bench of the Bombay High Court in Waman Vishwanath v. Yeshwant Tukaram, AIR 1949 Bom 97. It was held therein that where the obligation undertaken by the judgment-debtor was a result of a concession given by the decree-holder, the judgment-debtor was not entitled to relief against the breach committed by him. In Laxminarayan v. Gopikisan, 1960 MPLJ (N) 170 it was held that where in a compromise decree it was stipulated that on payment by the defendant of the amounts specified therein the property would be reconveyed to him by the plaintiff and that on his failure to pay the same on the stipulated dates the claim for his ejectment and arrears of rent would stand decreed, the defendant was given a choice to exercise his option of having a sale deed executed upon payment of the instalments on the stipulated dates as a matter of concession and it was in consideration of the said concession that the alternative term was provided making the decree for ejectment and arrears of rent operative in the event of a default by the defendant.

13. Thus, where it appears that at the time of the compromise the plaintiff was entitled to the relief of eviction but he agreed, as a matter of concession to the defendant, to forego that relief if the defendant made certain payments on specified dates, the clause that the defendant would be liable to be evicted on his failure to pay the amounts specified therein on due dates cannot be construed as a penal clause and that is exactly the position here. I, therefore, hold that the clause relating to ejectment in the decree is not a penal clause.

14. Next point for consideration is whether in construing the decree as it stands time should be deemed to be the essence so far as the dates of payment of the various instalments are specified in the decree. Ordinarily time is of the essence where one party agrees to forego something to which he is entitled if the defendant pays a certain sum or performs a particular act by a specified date. But even if it is held that rigid adherence to the said dates was not essential, it appears to us that the appellant did not make any sincere effort to pay the 4th instalment of Rs. 1,976/- which wasdue on 30-1-1974 within time. There is a concurrent finding of the Courts below that the appellant attempted to gain time by merely making a show of his earnestness because he was unable to pay the requisite amount on the due date. It is no doubt true that he deposited a cheque in time but it was dishonoured because there were alterations winch had not been initialled. According to the respondents, the alterations were deliberate so that the cheque may not be cashed.

15. The contention of the learned counsel for the appellant is that the alterations were innocent and they were not initialled through inadvertence. But if this was so we would expect the appellant to pay or deposit the entire amount promptly in cash or issue a fresh cheque for the amount; but he did nothing of the kind. He merely put in an application for extension of time to pay the amount which was ultimately rejected and it would appear from the record that it was actually deposited as late as 16-1-75 after coercive process was issued by the Court to realise the amount.

16. From para. 3 of the application filed by the appellant for extension of time it would appear that he came to know about the cheque being dishonoured on 9-4-1974 but he did not care to pay or deposit the amount till January, 1975 and merely kept on asking for time. This fully supports the conclusion of the lower Court that the appellant was not actually in a position to pay the amount and was, therefore, adopting the delaying tactics to postpone the payment. In these circumstances there is no question of treating the payment as having been made within time according to the terms of the decree and the Courts below rightly rejected the application for extension of time.

17. Since the appellant is himself responsible for not making the payments within time he forfeited his right to the concession given to him under the decree and as such is liable to be evicted.

18. The appeal, therefore, fails and is hereby dismissed with costs.